A developer signs four consumers to a 10 MW plant and settles the equity split in a term sheet. The 26% and 51% are then treated as a finance matter. Months later a verifier asks for meter files, a single line diagram (SLD) and 15-minute energy accounts. The plant has none of them in a form that adds up.
This guide is for the developer or asset owner preparing a group captive solar approval for an open access plant in India. It shows the two tests in Rule 3 of the Electricity Rules, 2005 as they stand today. It then shows which engineering document produces each number the verifier checks. We read the Gazette text, the central open access rules and two state texts, and we say where we could not read a source. This is not legal advice. Have a lawyer review the shareholding and the power agreements.
Quick answer. Group captive status under Rule 3 of the Electricity Rules, 2005 rests on two tests: captive users hold at least 26% of the plant and consume at least 51% of its generation in the financial year. Since 13 March 2026, a state nodal agency or the National Load Despatch Centre verifies both. Company papers prove the equity. Meter data proves the consumption, so the SLD and metering scheme decide the file.
What did the March 2026 amendment change in Rule 3?
The Ministry of Power substituted Rule 3 in full by notification G.S.R. 186(E) dated 13 March 2026. The notification is titled the Electricity (Amendment) Rules, 2026. It is in the Gazette of India Extraordinary, Part II Section 3(i), in a copy hosted by EQ Magazine. The rules apply from publication. Rule 3(2)(d)(ii), 3(2)(d)(iii) and sub-rule (4) apply from 1 April 2026.
The Ministry of Power also issued a press release on 14 March 2026 that lists the changes. The table sets the current text against the older wording, which we read as quoted in MSEDCL Commercial Circular 303 of 26 April 2018.
| Topic | Rule 3 text before 2023 (as quoted in 2018) | Rule 3 from 13 March 2026 |
|---|---|---|
| Ownership test | Captive users hold at least 26% of the ownership | Same 26%. Ownership now includes holdings through subsidiaries, the holding company and its other subsidiaries |
| Consumption test | At least 51% of aggregate generation, “determined on an annual basis” | At least 51% of aggregate generation “during the financial year” |
| Association of persons (AoP) | Users consume 51% “in proportion to their shares in ownership” within a variation not exceeding ten percent | Tests are met collectively. An individual user’s captive consumption counts up to 100% of its proportionate share. Excess still counts toward the collective 51% |
| Large holder | No exemption | A user holding 26% or more is not subject to the proportionate limit |
| Corporate groups | Not addressed | A user, its subsidiaries, its holding company and that company’s other subsidiaries count as one user |
| Special purpose vehicle (SPV) | Unit-level option for an SPV | An SPV is treated as an AoP |
| Who verifies | Not set in Rule 3. Left to licensees and commissions | State nodal agency for intra-state cases, the National Load Despatch Centre (NLDC) for multi-state cases |
| Charges while verification is pending | Not addressed | Cross-subsidy surcharge (CSS) and additional surcharge (AS) are not levied if the users file the prescribed declaration |
| Failed verification | Entire generation treated as supply by a generating company | Same. CSS and AS become payable with carrying cost at the base rate of the Late Payment Surcharge Rules, 2022 |
The Gazette explanatory note says the June 2023 amendment tried to extend captive benefits to group companies. It records that readings of that amendment diverged and that the 2026 text was meant to settle them. We did not open the June or September 2023 notifications, because the 2026 rule replaces Rule 3 entirely. Quote the 2026 text, not a summary of the 2023 changes.
What is the difference between captive and group captive?
Both pass through the same two tests in Rule 3(2)(a). The difference is who holds the equity and how the consumption is split.
- Captive. One consumer, or one corporate group counted as one user, owns at least 26% and consumes at least 51% of generation.
- Group captive. Several unrelated consumers own the plant through an SPV or another AoP. The 26% and the 51% are tested on all of them together (Rule 3(2)(d)(i)). Each user also has an individual limit set by its equity share.
- Co-operative society. The conditions are met collectively by the members (Rule 3(2)(c)).
- Unit of an SPV station. Where an SPV owns a larger station, one unit can be the captive plant. The Gazette illustration takes two 50 MW units and names Unit A the captive plant. Equity of 13% of the company is then enough, which is 26% of Unit A’s half (Rule 3(2)(b)).
Size is not a captive test. The central Rules set a 100 kW load floor. For captive consumers, “there shall not be any load limitation” (Rule 2(1)(b) of the Green Energy Open Access Rules, 2022, G.S.R. 418(E)). The Karnataka High Court struck those Rules down in January 2025, as reported, and we could not confirm the status of any appeal. Treat the state regulation as what applies. Our state open access guide tracks that ruling. Gujarat’s 2024 regulation repeats the no-limit proviso for captive consumers in its own text. Read your state’s regulation before relying on the central wording.
For the commercial comparison against a power purchase agreement or capex plant, see our PPA vs capex vs opex guide and the CFO decision framework.
Who verifies captive status, and when?
Rule 3(4) gives the answer in three parts.
- Where the plant and all its captive users are in one state, the nodal agency designated by the State Government verifies status. It uses a procedure it issues itself.
- Where they are in more than one state, the NLDC verifies, under a procedure it issues with Central Government approval.
- An appeal lies to a Grievance Redressal Committee constituted by the Appropriate Government.
The rule does not name the distribution licensee as the verifier. The state texts we read still do. We could not confirm that Gujarat or Maharashtra has designated a nodal agency or issued a verification procedure under Rule 3(4). Treat the state rows below as the last documents we could read. Ask your licensee or the state energy department which procedure applies to your financial year.
Verification covers the whole financial year (Rule 3(2)(a)(ii)). The Ministry’s press release and the explanatory note add one point. In the first or last year of ownership, verification can cover the relevant part of the year. If the ownership pattern changes during the year, Rule 3(2)(d)(iv) sets each user’s proportionate consumption on its weighted average shareholding. A mid-year entry or exit therefore changes the limits for everyone.
Which engineering documents does a group captive solar approval need?
The equity test is proved by company documents: the memorandum and articles, the shareholders’ agreement, and a record of changes in shareholding. Gujarat’s Schedule I lists these and asks for the periods of each holding. They are legal and finance papers, and we do not cover them further.
The consumption test is different. Every figure in it is a meter reading, so it is proved by the engineering file. The table links each number the verifier needs to the document that produces it.
| Number the verifier needs | Document that produces it | What must be true |
|---|---|---|
| Aggregate generation of the plant (ex-bus) | SLD with generation meters marked, and the meter files from them | Main and check meters on the outgoing feeders, readings by month and by time block |
| Each user’s consumption from the plant | SLD at each consumer, consumer-end meter files, wheeling and banking statements | Meters at each consumer connection, on the same time blocks as generation |
| Units banked and later drawn | Energy accounting statement from the licensee | Banking rule of the state and the billing cycle match the statement |
| Group entities in different licence areas | Each entity’s own consumption report | Each entity reports to its own licensee, with the group entitlement stated (explanatory note) |
| Plant configuration | SLD, layout and equipment list | Capacity on the SLD equals the capacity in the connectivity approval and the agreements |
| Statutory safety clearance | Drawings and test records for the Electrical Inspector | Drawings match the SLD. See our CEIG approval guide |
Four documents carry most of the weight.
- SLD with the metering points drawn in. Mark every main, check and standby meter, its voltage level and the metering class. The SLD glossary entry explains the diagram. A diagram that omits the meters cannot support an energy account.
- Metering scheme. The CEA metering regulations make the owner of an interface meter submit its location scheme in advance. The scheme goes to the Central or State Transmission Utility or the licensee. This is in Regulation 7. We read the consolidated text hosted by CBIP, current to January 2020. Later amendments exist, and we did not read them.
- Connectivity approval. The STU decides the substation and voltage. Our STU connectivity guide covers that application, so we do not repeat it here. The CTU and STU glossary entry explains who owns which network.
- CEIG drawings and test records. The Electrical Inspector’s approval comes before charging. The sequence is in our CEIG guide.
The four documents must agree on capacity, voltage and meter locations. Our guide to solar project loan documents shows the same agreement test for the lender file. A group captive plant needs both sets to read as one project.
How do metering and energy accounting work for a captive plant?
The CEA (Installation and Operation of Meters) Regulations, 2006 set the frame. Three points matter for design.
- Interface meters. An interface meter sits at the point of interconnection between a generating company, a licensee and an open access consumer. Its accuracy class is 0.2S.
- Generating station meters. The table in Regulation 7 puts main and check meters on all outgoing feeders. Standby meters go on the high voltage side of generator and station auxiliary transformers. Meters in generating stations must be 0.2S at a point after the generator terminals, per the schedule.
- Ownership. Under Regulation 6, interface meters at an interconnection with the intra-state transmission system are owned by the STU. A plant that connects at an STU substation will not own its own interface meter.
States add detail on top. For consumers of 1 MW or more, the Gujarat regulation requires four-quadrant ABT compliant meters (Regulation 20). They go at the generator end, the interface points and the consumption place. It also asks for a Remote Terminal Unit so the State Load Despatch Centre (SLDC) can monitor in real time (Regulation 9(III)). ABT stands for availability based tariff. The Gujarat text pairs ABT meters with accounting on 15-minute time blocks. MSEDCL Circular 303 asks for a separate Special Energy Meter on each captive generating unit with real-time communication to the SLDC, under clause 3.1. It also asks for monthly data at the generator transformer level, outgoing feeder level and auxiliary consumption by the 10th of the next month (clause 3.3).
Design consequence: put the meter list in the SLD and give each meter a data path to the SLDC. Agree the meter locations before the cable schedule is fixed. Meters are tested, installed and sealed jointly (MSEDCL clause 3.4), so a late move repeats that work.
How does banking work under the open access rules?
Banking lets surplus green energy fed into the grid be credited and drawn later, with a charge. The central text is Rule 8 of the Green Energy Open Access Rules, 2022. It says banking is permitted at least monthly, on charges the commission fixes. The permitted quantum is at least 30% of the consumer’s monthly consumption from the licensee. Credit is not carried forward past the month.
Gujarat’s 2024 regulation is more specific (Regulation 17.6).
- Banked energy is worked out on 15-minute time blocks, as injection less the consumer’s drawal in the same block.
- Banked energy from the peak period can be drawn in peak or off-peak. Banked energy from off-peak can be drawn only off-peak, within the billing cycle.
- Banking is optional. A consumer who opts out files an undertaking and cannot change the choice for three years. Lapsed banked energy does not earn renewable energy certificates.
- The banking charge was ₹1.50 per unit until 30 September 2024. After that the text leaves the charge to a separate commission notification. We did not find the current rate.
Two cautions. First, the Karnataka High Court ruling means the central banking rule cannot be assumed to apply in a state that has not adopted it. Second, none of the texts we read says whether energy drawn from the bank counts toward the 51%. Ask your nodal agency before the plant is sized. Rule 3(1)(a) counts consumption through an energy storage system, but it does not mention a banking credit.
For sizing, banking means the plant’s AC capacity should follow the consumers’ daytime load in 15-minute blocks, not only their monthly units. Generation that no consumer draws in the same time block does not add to the 51%, unless the state’s banking rule credits it. No text we read says it does.
How do states differ, and what do the state texts say?
We read two state documents in full for this section. Karnataka is not in the table because we could not open a primary text. A single report, by SCC Online, says the Karnataka High Court quashed the KERC captive verification procedure on 12 June 2026. We could not read the judgment or the KERC order, so we draw no conclusion beyond the fact that state procedures can change.
| Gujarat | Maharashtra | |
|---|---|---|
| Document read | GERC Terms and Conditions for Green Energy Open Access Regulations, 2024, Notification No. 08 of 2024, as hosted by EQ Magazine | MSEDCL Commercial Circular 303, 26 April 2018, issued after MERC’s order of 17 January 2018 in Case No. 23 of 2017 |
| Who verifies in the text | The distribution licensee, which may take help from the RLDC or SLDC (Schedule I) | MSEDCL, through the Chief Engineer (Commercial) or the Circle Superintending Engineer (clause 4.4) |
| Filing | Affidavit with entity-wise consumption and shareholding by 31 October after the financial year (Regulation 9(VI)) | Data by 30 April for the previous year (clause 4.3). Status confirmed by 31 May (clause 4.4) |
| Time to decide | Licensee verifies within three months of receipt (Regulation 9(VIII)) | Status communicated by 31 May |
| Failed status | Licensee goes to GERC. CSS and AS recovered with late payment surcharge, and the plant is treated as a normal open access consumer | Generator may go to MERC by 15 June. Otherwise CSS and AS recovered by supplementary bill (clause 4.5) |
| Multi-state plants | CEA verifies, per a Ministry of Power notification of 1 September 2023 | The Chief Engineer (Commercial) handles inter-state plants (clause 4.4) |
| Age against Rule 3 (2026) | Pre-dates it. The CEA reference is replaced by the NLDC in Rule 3(4) | Pre-dates it. Quotes the old Rule 3 |
Read the table as a record of the documents each state asked for before 2026, not as the current procedure. Our Gujarat and Maharashtra policy guides cover the wider state rules. For the cost lines that apply once the plant is approved, see the glossary entries on open access, wheeling charges and energy banking.
Worked example: a 10 MW group captive plant
This example is illustrative. The plant, the shareholdings and the consumption are assumed, and they are not a real project. We apply the current Rule 3(2)(d) and the formula in Schedule III of the Gazette notification.
Assumptions. A 10 MWac plant owned by an SPV, which Rule 3 treats as an AoP. Ex-bus generation for the financial year is 24,000 MWh, which is a 27.4% capacity utilisation on the AC rating. The SPV is 74% held by the developer, who is not a captive user. Four consumers hold the rest.
Step 1: the ownership test. The captive users hold 10 + 8 + 5 + 3 = 26% in total, written as X. That meets the 26% minimum with no margin.
Step 2: the consumption test. Take each user’s drawal as a share of ex-bus generation.
| Consumer | Equity x (%) | Actual consumption (% of generation) | Actual consumption (MWh) |
|---|---|---|---|
| A | 10 | 24 | 5,760 |
| B | 8 | 14 | 3,360 |
| C | 5 | 8 | 1,920 |
| D | 3 | 6 | 1,440 |
| Total | X = 26 | Y = 52 | 12,480 |
The plant needs 51% of 24,000 MWh, which is 12,240 MWh. The users drew 12,480 MWh, so the plant passes with a 240 MWh margin. That margin is one percentage point.
Step 3: each user’s limit. Schedule III sets the individual limit as Y times x divided by X.
| Consumer | Limit (Y × x ÷ X) | Actual | Counts as captive for the user |
|---|---|---|---|
| A | 52 × 10 ÷ 26 = 20.0% | 24% | 20.0%. The extra 4% (960 MWh) does not |
| B | 52 × 8 ÷ 26 = 16.0% | 14% | 14% |
| C | 52 × 5 ÷ 26 = 10.0% | 8% | 8% |
| D | 52 × 3 ÷ 26 = 6.0% | 6% | 6% |
Consumer A drew more than its share. Under Rule 3(3), that excess is treated as supply by a generating company, so CSS and AS apply to the 960 MWh. The excess still counts in the collective 52%, so the plant keeps its status.
Step 4: the failure case. Suppose two consumers cut their load and the collective drawal falls to 49%, two points short of 51%. Rule 3(3) then treats the entire 24,000 MWh as supply by a generating company, with CSS and AS on all of it. A two-point shortfall costs the whole year, not two points of it. With exactly 26% held by the users, any holder that exits and is not replaced also breaks the ownership test.
What the example shows. The 52% is the sum of four meter files. A verifier cannot check it without ex-bus generation readings and four consumer readings on the same time blocks. The metering scheme and the SLD make or break the file, not the term sheet.
What should the sequence of work be?
Order the work so that each document feeds the next.
- Fix the equity split and the consumer list. Keep the aggregate at or above 26% with a margin, and set it against the weighted average rule if holdings may change.
- Collect 15-minute load data for each consumer and size the plant against it.
- Draw the SLD with the generation and consumer meters, and agree the metering scheme with the STU and licensee.
- Apply for connectivity (see our STU connectivity guide).
- Prepare the CEIG drawings and test records from the same SLD.
- After commissioning, build the monthly meter file and the annual affidavit from the same meter data. The verifier and the licensee then see one set of numbers.
If the load is spread across rooftops and one plant is the wrong shape, read our guide to virtual and group net metering. It covers the arrangement that works inside one licence area.
Where does project management consultancy fit?
Steps 3 to 6 involve the SPV, the STU, the licensee, the Electrical Inspector and the nodal agency. The documents must agree across all of them. Our MW-scale project management consultancy page lists planning and feasibility, design and engineering support, procurement, construction management, quality assurance, commissioning and handover, and risk and compliance support. That is the page to read if you want one team to coordinate the engineering file.
FAQ
Does every consumer need 26% of a group captive plant?
No. The 26% is tested on all captive users together. A user that holds 26% or more on its own is exempt from the proportionate limit (Rule 3(2)(d)(i) and (iii)).
Does a parent company count together with its subsidiaries?
Yes, for ownership and for the proportionate calculation. A user, its subsidiaries, its holding company and that company’s other subsidiaries are treated as one user (Rule 3(2)(d)(v)). Where they sit in different licence areas, each reports its own consumption to its own licensee.
What happens if the plant fails verification?
The generation is treated as supply by a generating company, and CSS and AS are payable. If the users filed the declaration while verification was pending, the charges come with carrying cost at the Late Payment Surcharge base rate (Rule 3(4)(c)).
Who do I ask which procedure applies in my state?
Ask the state energy department and the distribution licensee. Rule 3(4) leaves each state to designate its own nodal agency, and we could not confirm a designation for the two states we read.
Next step
Before you sign the shareholders’ agreement, ask for the meter list and the SLD. Check the plan against your state’s current procedure. For help coordinating the engineering file, start from the MW-scale project management consultancy page. Or send your site and load details through our project quote form. We reply within 1 business day.
Last reviewed: 31 October 2026. Next review: April 2027, or sooner if a state notifies its nodal agency or verification procedure under Rule 3(4).